Money Moral Dilemma: Should we take a mortgage holiday even though we don't need one?

Takmon

edinburgher said:

I did exactly this, now regretting it as it appears the whole "it won't affect your credit history" chat that was so prevalent isn't the whole picture and that this may affect our chances of remortgaging!

Well like other posters have said it is correct that it won't affect your credit history but when lenders see you have had to miss three months of payments then it must have been obvious to you that it wouldn't look good?. People don't take payment holidays unless they need to so this is good data for lenders for the future to be able to tell the difference between people who manage their finances well and plan for situations without income and those who live month to month. 

Tammykitty

I took a payment holiday on  my mortgage and have continued to make small payments each month, hopefully enough to cover the interest element of the mortgage anyway. The money is stopping us from getting more into debt during this troubled period. Am dreading it finishing, and my rates payments will be due again soon too - as we also had a small break from them.

phillw

Well like other posters have said it is correct that it won't affect your credit history but when lenders see you have had to miss three months of payments then it must have been obvious to you that it wouldn't look good? 

If they are reporting that a payment was missed, then by definition it is affecting your credit history.
I thought they were reporting the payment holidays as if no payment was missed.

phillw

It's not free money but like you I have debt and this gave me more income to chuck at it, reducing the time it will take to clear. It made sense in my situation where I'm using all spare money to reduce the 0% credit card debt before it needs transferring again.

Did you actually pay the money off the 0% card, or put it in a savings account so that you can pay it off when it's due?
If you paid it off then you swapped 0% debt for whatever your mortgage interest rate is, which will increase the time it takes to clear.
If you wouldn't be able to transfer your 0% to a no fee credit card in the future and this mortgage holiday now is the only way you could pay the credit card off then it's not necessarily a bad idea, but you should at least mitigate the loss of interest by saving it somewhere until the 0% ends.

Takmon

phillw said:

Well like other posters have said it is correct that it won't affect your credit history but when lenders see you have had to miss three months of payments then it must have been obvious to you that it wouldn't look good? 

If they are reporting that a payment was missed, then by definition it is affecting your credit history.
I thought they were reporting the payment holidays as if no payment was missed.

It won't be reported as a missed payment but they still have to provide accurate data to the credit reference agencies so it will be on the person's credit file that no payments were made in these 3 months and the outstanding balance did not decrease. So it will be a simple matter for lenders to add this check into any future lending decisions to see if people have had to take a mortgage payment holiday. 
There really is no way for them to avoid this unless the falsely reported to the CRA's that the balance was still decreasing each month and they would have to continue this "ruse" with false figures until the end of the mortgage term because the real outstanding balance would never match the false reported one. But even then if the customer remortgaged to another lender the disparity in outstanding balance would then be highlighted on the report as it would suddenly jump unless the new lender also continued this false reporting ruse... so it will never happen. 

goatfaced

phillw said:

It's not free money but like you I have debt and this gave me more income to chuck at it, reducing the time it will take to clear. It made sense in my situation where I'm using all spare money to reduce the 0% credit card debt before it needs transferring again.

Did you actually pay the money off the 0% card, or put it in a savings account so that you can pay it off when it's due?
If you paid it off then you swapped 0% debt for whatever your mortgage interest rate is, which will increase the time it takes to clear.
If you wouldn't be able to transfer your 0% to a no fee credit card in the future and this mortgage holiday now is the only way you could pay the credit card off then it's not necessarily a bad idea, but you should at least mitigate the loss of interest by saving it somewhere until the 0% ends.

Yes thanks, I did put it elsewhere until it's needed and noted it in my spreadsheet, so in theory my debt is reduced but in the meantime I'm earning some interest.
My main point was that having non-mortgage debt is a bad situation and I personally have used this holiday towards clearing mine. I wonder if I'm alone in this? Are those saying no in this situation? I hate it. I know that in the long term my mortgage will end up being more expensive, but in the short term I'm not managing to clear the debt as fast as I'd like. It's a psychological thing I suppose, the unpleasant feeling of my getting out of debt plan being spread over so many years.

I don't even know if this dilemma is genuine, but it's made me think about things from other angles so it's been interesting. 

nannyto2

wont is mess up your credit sscore?

dunstonh

phillw said:

Well like other posters have said it is correct that it won't affect your credit history but when lenders see you have had to miss three months of payments then it must have been obvious to you that it wouldn't look good? 

If they are reporting that a payment was missed, then by definition it is affecting your credit history.
I thought they were reporting the payment holidays as if no payment was missed.

It is not being recorded as missing or as default or arrears but it will show as no payment made in that month.   Banks do not look at the credit scores issued by the credit agencies.  They look at the raw data.   So, they will clearly see the nil payments.

It is likely that it will be classed as a negative in a lending decision.  However, lots of things are.  The cherry-picking lenders may class it as a larger negative than others.   However, an individual is not pushing limits and has a few other negative issues and a number of positives then they should be fine.

The FCA has confirmed that the lenders can use the fact the person took authorised arrears in future lending decisions.